Bill Text: CT HB06356 | 2013 | General Assembly | Comm Sub

Connecticut House Bill 6356 (Prior Session Legislation)

Bill Title: An Act Concerning Benefit Corporations And Encouraging Social Enterprise.

Spectrum: Partisan Bill (Democrat 28-0)

Status: (Engrossed - Dead) 2013-05-22 - File Number 839 [HB06356 Detail]

Download: Connecticut-2013-HB06356-Comm_Sub.html

General Assembly		*Substitute Bill No. 6356*
*January Session, 2013*		_____HB06356APP___051413____

AN ACT CONCERNING BENEFIT CORPORATIONS AND ENCOURAGING SOCIAL ENTERPRISE.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2013) As used in this section and sections 2 to 12, inclusive, of this act:

(1) "Benefit corporation" means a business corporation (A) that has elected to become subject to the provisions of this section and sections 2 to 12, inclusive, of this act, and (B) whose status as a benefit corporation has not been terminated pursuant to section 6 of this act.

(2) "Benefit director" means either (A) the director designated as the benefit director of a benefit corporation pursuant to section 8 of this act, or (B) a person with one or more of the powers, duties or rights of a benefit director as provided in a benefit corporation shareholder agreement that eliminates the board of directors or transfers to one or more shareholders or other persons all or part of the authority to exercise corporate powers or to manage the business and affairs of the corporation.

(3) "Benefit enforcement proceeding" means any claim or action for (A) the failure of a benefit corporation to pursue or create a general public benefit or any specific public benefit set forth in its certificate of incorporation, bylaws or otherwise adopted by its board of directors, or (B) the violation of any obligation, duty or standard of conduct under sections 2 to 12, inclusive, of this act.

(4) "Benefit officer" means the individual designated as the benefit officer of a benefit corporation pursuant to section 10 of this act.

(5) "Business corporation" means a corporation whose internal affairs are governed by chapter 601 of the general statutes.

(6) "Charitable organization" means any nonprofit organization organized for charitable purposes to which has been issued a ruling by the Internal Revenue Service classifying it as an exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time.

(7) "General public benefit" means a material positive impact on society and the environment, taken as a whole and assessed against a third-party standard, from the business and operations of a benefit corporation.

(8) "Legacy preservation provision" means a provision providing that a benefit corporation (A) shall, upon dissolution, distribute its assets to one or more charitable organizations or benefit corporations that have enacted such provision, and (B) may not otherwise terminate its status as a benefit corporation.

(9) "Minimum status vote" means, in addition to any other required approval or vote, a vote in which (A) the shareholders of every class or series shall be entitled to vote on the corporate action regardless of a limitation stated in the certificate of incorporation or bylaws on the voting rights of any class or series, and (B) the corporate action is approved by the affirmative vote of at least two-thirds of the voting power of each voting group entitled to vote thereon.

(10) "Specific public benefit" means a benefit that serves one or more public welfare, religious, charitable, scientific, literary or educational purposes, or other purpose or benefit beyond the strict interest of the shareholders of the benefit corporation, and includes: (A) Providing low-income or underserved individuals or communities with beneficial products or services, (B) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business, (C) preserving or improving the environment, (D) improving human health, (E) promoting the arts, sciences or advancement of knowledge, (F) increasing the flow of capital to entities with a public benefit purpose, and (G) conferring any other particular benefit on society or the environment.

(11) "Subsidiary" means, in relation to an individual, an entity in which the individual either (A) owns directly or indirectly equity interests entitled to cast a majority of the votes entitled to be cast generally in an election of directors or members of the governing body of the entity, or (B) otherwise owns or controls voting or contractual power to exercise effective governing control of the entity. The percentage of ownership of equity interests or ownership or control of power to exercise control shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(12) "Third-party standard" means a recognized standard for defining, reporting and assessing corporate social and environmental performance that is (A) developed by an organization that is independent of the benefit corporation, and (B) easily understood because the following information concerning the standard is publicly available: (i) The factors considered when measuring the performance of a business, (ii) the relative weightings of those factors, and (iii) the identity of the persons that develop and control changes to the standard and the process by which those changes are made.

(13) "Unanimous vote" means, in addition to any other required approval or vote, a vote in which (A) the shareholders of every class or series shall be entitled to vote on the corporate action regardless of a limitation stated in the certificate of incorporation or bylaws on the voting rights of any class or series, and (B) the corporate action is approved by the affirmative vote of the entire voting power of each voting group entitled to vote thereon.

(14) "Voting group" means all shares of one or more classes or series that under the certificate of incorporation, sections 33-600 to 33-998, inclusive, of the general statutes or this section and sections 2 to 12, inclusive, of this act are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the certificate of incorporation or said sections to vote generally on the matter are for that purpose a single voting group.

(15) "Voting power" means the current power to vote on a matter at a meeting of shareholders.

Sec. 2. (NEW) (Effective October 1, 2013) (a) Sections 1 to 12, inclusive, of this act shall be applicable to all benefit corporations.

(b) The existence of a provision of sections 1 to 12, inclusive, of this act shall not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. The provisions of sections 1 to 12, inclusive, of this act shall not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation.

(c) Except as otherwise provided in sections 1 to 12, inclusive, of this act, the provisions of chapter 601 of the general statutes shall be generally applicable to all benefit corporations. The specific provisions of sections 1 to 12, inclusive, of this act shall control over the general provisions of chapter 601 of the general statutes.

(d) A provision of the certificate of incorporation or bylaws of a benefit corporation may not limit, be inconsistent with, or supersede a provision of sections 1 to 12, inclusive, of this act.

(e) Nothing in sections 1 to 12, inclusive, of this act shall (1) be construed as creating or granting to any person any contractual right to, or proprietary interest in, the income or assets of the benefit corporation by virtue of the fact that he or she may directly or indirectly benefit from the general or any specific public benefit of the benefit corporation, (2) be construed as imposing or creating a charitable use, interest or restriction on any property or assets of a benefit corporation, or (3) deprive the Attorney General of jurisdiction over a benefit corporation under any other applicable law.

Sec. 3. (NEW) (Effective October 1, 2013) (a) A benefit corporation shall be formed in accordance with the provisions of chapter 601 of the general statutes and its certificate of incorporation, as initially filed with the office of the Secretary of the State or as amended, shall state that such corporation is a benefit corporation.

(b) In addition to its purpose under chapter 601 of the general statutes, a benefit corporation shall have a purpose of creating a general public benefit. Such purpose shall be set forth in the corporation's certificate of incorporation.

(c) The certificate of incorporation of a benefit corporation may identify one or more specific public benefits that are the purpose of the benefit corporation to create in addition to its purposes under chapter 601 of the general statutes or subsection (b) of this section. The identification of a specific public benefit under this subsection shall not limit the obligation of a benefit corporation to pursue a general public benefit established pursuant to subsection (a) of this section or its purpose under chapter 601 of the general statutes.

(d) The creation of a general public benefit and one or more specific public benefits, if any, pursuant to this section is in the best interests of the benefit corporation.

(e) A benefit corporation may amend its certificate of incorporation to add, amend or delete the identification of a specific public benefit that is the purpose of the benefit corporation to create. Any such amendment shall be adopted in accordance with the procedures set forth in section 33-797 of the general statutes and shall be approved by a minimum status vote.

Sec. 4. (NEW) (Effective October 1, 2013) (a) A business corporation that was not formed as a benefit corporation may become a benefit corporation by amending its certificate of incorporation so that such certificate contains, in addition to matters required by section 33-636 of the general statutes, (1) a statement that the corporation is a benefit corporation, and (2) a purpose of creating a general public benefit. Any such amendment shall be adopted in accordance with the procedures set forth in section 33-797 of the general statutes and shall be approved by a minimum status vote.

(b) Any corporation that is not a benefit corporation that is a party to a merger or consolidation in which the survivor or consolidated corporation will be a benefit corporation shall approve the plan of merger or consolidation by a minimum status vote in addition to any other vote required by sections 33-814 to 33-821a, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(c) Any corporation that is not a benefit corporation that is a party to a merger or consolidation in which shares of stock of such corporation will be converted into a right to receive shares of stock of a benefit corporation shall approve the plan of merger or consolidation by a minimum status vote in addition to any other vote required by sections 33-840 to 33-845, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

Sec. 5. (NEW) (Effective October 1, 2013) (a) A benefit corporation may, after not less than twenty-four months from the date it filed its certificate of incorporation with the Secretary of the State, enact a legacy preservation provision by amending its certificate of incorporation so that such certificate contains a statement that the corporation is subject to a legacy preservation provision. Any such amendment shall be adopted in accordance with the procedures set forth in section 33-797 of the general statutes and shall be approved by (1) a unanimous vote, or (2) written consent of the shareholders of every class or series regardless of a limitation stated in the certificate of incorporation or bylaws on the voting rights of any class or series.

(b) Notwithstanding the provisions of sections 33-880 to 33-900, inclusive, of the general statutes, the assets of a benefit corporation that dissolves pursuant to chapter 601 of the general statutes and has enacted a legacy preservation provision shall be applied and distributed as follows: (1) All liabilities and other obligations of the benefit corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefore, and (2) all remaining assets received and held by the benefit corporation shall be transferred or conveyed to one or more charitable organizations or benefit corporations that have enacted a legacy preservation provision pursuant to this section.

Sec. 6. (NEW) (Effective October 1, 2013) (a) Except for a benefit corporation that has enacted a legacy preservation provision pursuant to section 5 of this act, a benefit corporation may terminate its status as such and cease to be subject to the provisions of sections 1 to 12, inclusive, of this act by amending its certificate of incorporation to delete any provision stating that such corporation is a benefit corporation. Any such amendment shall be adopted in accordance with the procedures set forth in section 33-797 of the general statutes and shall be approved by a minimum status vote.

(b) Except for a benefit corporation that has enacted a legacy preservation provision pursuant to section 5 of this act, a benefit corporation may be a party to a merger or consolidation in which the survivor of the merger will not be a benefit corporation, provided the plan of merger or consolidation shall not be effective unless such plan is adopted by a minimum status vote in addition to any other vote required by sections 33-814 to 33-821a, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(c) Except for a benefit corporation that has enacted a legacy preservation provision pursuant to section 5 of this act, a benefit corporation may be a party to a merger or consolidation in which shares of stock of such benefit corporation will be converted into a right to receive shares of stock of a corporation that is not a benefit corporation, provided such plan of merger or consolidation shall not be effective unless such plan is adopted by a minimum status vote in addition to any other vote required by sections 33-840 to 33-845, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(d) (1) Except for a benefit corporation that has enacted a legacy preservation provision in accordance with section 5 of this act, a sale, lease, exchange or other disposition of all, or substantially all, of the assets of a benefit corporation, unless such disposition is in the usual and regular course of business of the benefit corporation, shall not be effective unless such disposition is approved by a minimum status vote in addition to any other vote required by section 33-831 of the general statutes, the certificate of incorporation or the bylaws; and (2) a benefit corporation that has enacted a legacy preservation provision shall not enter into a sale, lease, exchange or other disposition of all, or substantially all, of the assets of a benefit corporation, unless such disposition is in the usual and regular course of business of the benefit corporation, the parties to the disposition are charitable organizations or benefit corporations that have enacted legacy preservation provisions pursuant to section 5 of this act, and such disposition is approved by a minimum status vote in addition to any other vote required by section 33-831 of the general statutes, the certificate of incorporation or the bylaws.

Sec. 7. (NEW) (Effective October 1, 2013) (a) The board of directors, committees of the board and individual directors of a benefit corporation when discharging the duties of their respective positions and considering the best interests of the benefit corporation:

(1) Shall consider the effects of any corporate action upon:

(A) The shareholders of the benefit corporation,

(B) The employees and workforce of the benefit corporation, and its subsidiaries and suppliers,

(C) The interests of customers as beneficiaries of the general public benefit purpose or any specific public benefit purpose of the benefit corporation,

(D) Community and societal factors, including those of each community in which offices or facilities of the benefit corporation, or its subsidiaries or suppliers are located,

(E) The local and global environment,

(F) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests and the general public benefit purpose and any specific public benefit purposes of the benefit corporation may be best served by the continued independence of the benefit corporation, and

(G) The ability of the benefit corporation to accomplish its general public benefit and any specific public benefit;

(2) May consider (A) the resources, intent, and past, stated and potential conduct of any person seeking to acquire control of the benefit corporation, and (B) other pertinent factors or the interests of any other person that they deem appropriate; and

(3) Need not give priority to the interests of a particular person referred to in subdivision (1) or (2) of this subsection over the interests of any other person unless the benefit corporation has stated its intention to give priority to interests related to a specific public benefit purpose identified in its certification of incorporation.

(b) The consideration of interests and factors in the manner required by subsection (a) of this section (1) shall not constitute a violation of section 33-756 of the general statutes, and (2) is in addition to the power of directors to consider the interests and factors referred to in subsection (d) of section 33-756 of the general statutes.

(c) In any proceeding brought by or in the right of a benefit corporation or brought by or on behalf of the shareholders of a benefit corporation, a director is not personally liable for monetary damages for (1) any action taken as a director if the director performed the duties of office in compliance with section 33-756 of the general statutes and this section, or (2) the failure of the benefit corporation to create a general public benefit or any specific public benefit specified in its certificate of incorporation, bylaws or otherwise adopted by the board of directors.

(d) A director shall not have a duty to a person that is a beneficiary of the general public benefit purpose or any specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.

Sec. 8. (NEW) (Effective October 1, 2013) (a) The board of directors of a benefit corporation that is a publicly traded corporation shall, and the board of any other benefit corporation may, include a director who shall (1) be designated the benefit director, and (2) have, in addition to the powers, duties, rights and immunities of the other directors of the benefit corporation, any additional powers, duties, rights and immunities provided (A) by the bylaws, or (B) absent controlling provisions in the bylaws, by resolutions or orders of the board of directors.

(b) The benefit director shall be elected, and may be removed, in the manner provided under chapter 601 of the general statutes. The benefit director shall not have a material relationship with the benefit corporation or a subsidiary of the benefit corporation. A material relationship between a person and a benefit corporation or any of its subsidiaries shall be conclusively presumed to exist if any of the following apply: (1) A person is, or has been within the last three years, an employee of the benefit corporation or a subsidiary of the benefit corporation; (2) an immediate family member of a person is, or has been within the last three years, an executive officer of the benefit corporation or a subsidiary of the benefit corporation; or (3) there is beneficial or record ownership of five per cent or more of the outstanding shares of the benefit corporation by (A) the person, or (B) an entity (i) of which the person is a director, an officer or a manager, or (ii) in which the person owns beneficially or of record five per cent or more of the outstanding equity interests, which percentage shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised. Currently or previously serving as a benefit director or benefit officer for the benefit corporation or a subsidiary of the benefit corporation shall not constitute a material relationship. The benefit director may serve as the benefit officer at the same time as serving as the benefit director. The certificate of incorporation, bylaws or a shareholder agreement of a benefit corporation may prescribe additional qualifications of the benefit director not inconsistent with this subsection.

(c) The benefit director shall prepare, and the benefit corporation shall include in the annual benefit report required by section 12 of this act, the opinion of the benefit director regarding (1) whether the benefit corporation acted in accordance with its general public benefit purpose and any specific public benefit purpose in all material respects during the period covered by the report, (2) whether the directors and officers complied with subsection (a) of section 7 of this act and subsection (a) of section 9 of this act, respectively, and (3) if the benefit corporation or its directors or officers failed to comply with subsection (a) of section 7 of this act or subsection (a) of section 9 of this act, a description of the ways in which the benefit corporation or its directors or officers failed to comply. If a benefit corporation does not elect a benefit director, the board of directors shall prepare such opinion pursuant to this subsection. If a shareholder agreement eliminates the board of directors or transfers to one or more shareholders or other persons all or part of the authority to exercise corporate powers or to manage the business and affair of the corporation, such agreement shall designate a person who shall prepare such opinion.

(d) The act or omission of an individual in the capacity of a benefit director shall constitute for all purposes an act or omission of that individual in the capacity of a director of the benefit corporation.

(e) Regardless of whether the certificate of incorporation of a benefit corporation includes a provision limiting the personal liability of directors as authorized by chapter 601 of the general statutes, a benefit director shall not be personally liable for any act or omission in the capacity of a benefit director unless the act or omission constitutes self-dealing, wilful misconduct or a knowing violation of law.

Sec. 9. (NEW) (Effective October 1, 2013) (a) Each officer of a benefit corporation shall consider the interests and factors described in subsection (a) of section 7 of this act in the manner provided in that subsection if (1) the officer has discretion to act with respect to a matter, and (2) it reasonably appears to the officer that the matter may have a material effect on the creation by the benefit corporation of a general public benefit or any specific public benefit identified in the certificate of incorporation of the benefit corporation.

(b) The consideration of interests and factors in the manner described in subsection (a) shall not constitute a violation of section 33-765 of the general statutes.

(c) An officer shall not be personally liable for (1) an act or omission as an officer in the course of performing the duties of an officer under subsection (a) of this section if the officer performed the duties of the position in compliance with section 33-765 of the general statutes and this section, or (2) the failure of the benefit corporation to pursue or create a general public benefit or any specific public benefit.

(d) An officer shall not have a duty to a person that is a beneficiary of the general public benefit purpose or any specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.

Sec. 10. (NEW) (Effective October 1, 2013) A benefit corporation may designate a benefit officer who shall have (1) the powers and duties relating to the purpose of the corporation to create a general public benefit or any specific public benefit provided (A) by the bylaws, or (B) absent controlling provisions in the bylaws, by resolutions or orders of the board of directors; and (2) the duty to prepare the benefit report required by subsection (b) of section 12 of this act.

Sec. 11. (NEW) (Effective October 1, 2013) (a) Except in a benefit enforcement proceeding, no person may bring an action or assert a claim against a benefit corporation or its directors or officers with respect to (1) the failure to pursue or create a general public benefit or any specific public benefit set forth in its certificate of incorporation, or (2) the violation of an obligation, duty or standard of conduct under sections 1 to 12, inclusive, of this act.

(b) A benefit corporation shall not be liable for monetary damages under sections 1 to 12, inclusive, of this act for any failure of the benefit corporation to pursue or create a general public benefit or any specific public benefit.

(c) A benefit enforcement proceeding may be commenced or maintained (1) directly by the benefit corporation, or (2) in accordance with the provisions of chapter 601 of the general statutes by (A) a person or group of persons that own beneficially or of record at least five per cent of the total number of shares of all classes and series outstanding on the date the benefit enforcement proceeding is commenced, (B) a person or group of persons that own beneficially or of record ten per cent or more of the outstanding equity interests in an entity of which the benefit corporation is a majority-owned subsidiary, or (C) other persons as specified in the certificate of incorporation of bylaws of the benefit corporation.

(d) For purposes of this section, a person is the beneficial owner of shares or equity interests if the shares or equity interests are held in a voting trust or by a nominee on behalf of the beneficial owner.

Sec. 12. (NEW) (Effective October 1, 2013) (a) A benefit corporation shall produce an annual benefit report.

(b) In preparing the annual benefit report, a benefit corporation shall select a third-party standard by which to assess its pursuit of a general public benefit and any specific public benefit. Selecting or changing a third-party standard shall require approval by (1) the greater of (A) a majority of all the directors in office when the action is taken, or (B) the number of directors required by the certificate of incorporation or bylaws of the benefit corporation to take action under this section; or (2) the vote or written consent of the shareholders required by the certificate of incorporation or bylaws of the benefit corporation to take action under this section.

(1) A narrative description of (A) the ways in which the benefit corporation pursued a general public benefit during the year and the extent to which a general public benefit was created; (B) (i) the ways in which the benefit corporation pursued any specific public benefit that the certificate of incorporation states it is the purpose of the benefit corporation to create, and (ii) the extent to which that specific public benefit was created; (C) any circumstances that have hindered the creation by the benefit corporation of a general public benefit or any specific public benefit; and (D) the process and rationale for selecting or changing the third-party standard used to prepare the benefit report;

(2) An assessment of the overall social and environmental performance of the benefit corporation against a third-party standard (A) applied consistently with any application of that standard in prior benefit reports, or (B) accompanied by an explanation of the reasons for any inconsistent application or the change to that standard from the one used in the report immediately prior;

(3) The name of the benefit director and the benefit officer, if any, and the address to which correspondence to each of them may be directed;

(4) The compensation paid by the benefit corporation during the fiscal year to each director in his or her capacity as a director;

(5) The opinion of (A) the benefit director, (B) the board of directors, or (C) the person designated in a shareholder agreement pursuant to subsection (c) of section 8 of this act;

(6) A statement of any connection between the organization that established the third-party standard, or its directors, officers or any holder of five per cent or more of the voting power or capital interests in the organization, and the benefit corporation or its directors, officers or any holder of five per cent or more of the outstanding shares of the benefit corporation, including any financial or governance relationship that might materially affect the credibility of the use of the third-party standard; and

(7) If a shareholder agreement eliminates the board of directors or transfers to one or more shareholders or other persons all or part of the authority to exercise corporate powers or to manage the business and affair of the corporation, a description of (A) the persons that exercise the powers, duties and rights and who have the immunities of the board of directors, and (B) the name of the person, if any, who is vested with the powers, duties, rights and immunities of a benefit director.

(d) If, during the year covered by a benefit report, a benefit director or benefit officer resigned from or refused to stand for reelection to the position of benefit director or benefit officer, or was removed from the position of benefit director or benefit officer, and the benefit director or benefit officer furnished the benefit corporation with a written statement or correspondence concerning the circumstances surrounding the resignation, refusal, or removal, the benefit report shall include that correspondence as an exhibit.

(e) The annual benefit report need not be audited or certified by the organization that designed the third-party standard used in the annual benefit report.

(f) A benefit corporation shall send its annual benefit report to each shareholder (1) not later than one hundred twenty days following the end of the fiscal year of the benefit corporation, or (2) at the same time that the benefit corporation delivers any other annual report to its shareholders, whichever is earlier.

(g) A benefit corporation shall post and maintain each annual benefit report on the public portion of its Internet web site, if any, but the compensation paid to directors and any financial, confidential or proprietary information included in any benefit report may be omitted from the benefit report as posted.

(h) If a benefit corporation does not have an Internet web site, the benefit corporation shall provide a copy of its most recent benefit report, without charge, to any person who requests a copy, provided the compensation paid to directors and any financial, confidential or proprietary information included in any benefit report may be omitted from such copy.

Sec. 13. Section 33-856 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) A shareholder is entitled to appraisal rights, and to obtain payment of the fair value of that shareholder's shares, in the event of any of the following corporate actions:

(1) Consummation of a merger to which the corporation is a party (A) if shareholder approval is required for the merger by section 33-817 and the shareholder is entitled to vote on the merger, except that appraisal rights shall not be available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger, or (B) if the corporation is a subsidiary and the merger is governed by section 33-818;

(2) Consummation of a share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the exchange, except that appraisal rights shall not be available to any shareholder of the corporation with respect to any class or series of shares of the corporation that is not exchanged;

(3) Consummation of a disposition of assets pursuant to section 33-831 if the shareholder is entitled to vote on the disposition, except that appraisal rights shall not be available to any shareholder of the corporation with respect to shares of any class or series if (A) under the terms of the corporate action approved by the shareholders there is to be distributed to shareholders in cash its net assets, in excess of a reasonable amount reserved to meet claims of the type described in sections 33-886 and 33-887, (i) within one year after the shareholders' approval of the action, and (ii) in accordance with their respective interests determined at the time of such distribution, and (B) the disposition of assets is not an interested transaction;

(4) An amendment of the certificate of incorporation with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share so created; [or]

(5) If the corporation is not a benefit corporation as defined in section 1 of this act, (A) an amendment of the certificate of incorporation to state that the corporation is a benefit corporation, (B) consummation of a merger to which the corporation is a party in which the surviving entity will be a benefit corporation, or (C) consummation of a share exchange to which the corporation is a party and the shares of the corporation will be exchanged for shares of a benefit corporation; or

[(5)] (6) Any other merger, share exchange, disposition of assets or amendment to the certificate of incorporation to the extent provided by the certificate of incorporation, the bylaws or a resolution of the board of directors.

(b) Notwithstanding subsection (a) of this section, the availability of appraisal rights under subdivisions (1), (2), (3), [and] (4) and (5) of subsection (a) of this section shall be limited in accordance with the following provisions:

(1) Appraisal rights shall not be available for the holders of shares of any class or series of shares which is:

(A) A covered security under Section 18(b)(1)(A) or (B) of the Securities Act of 1933, as amended;

(B) Traded in an organized market and has at least two thousand shareholders and a market value of at least twenty million dollars, exclusive of the value of such shares held by the corporation's subsidiaries, senior executives, directors and beneficial shareholders owning more than ten per cent of such shares; or

(C) Issued by an open-end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and may be redeemed at the option of the holder at net asset value.

(2) The applicability of subdivision (1) of this subsection shall be determined as of: (A) The record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to act upon the corporate action requiring appraisal rights; or (B) the day before the effective date of such corporate action if there is no meeting of shareholders.

(3) Subdivision (1) of this subsection shall not be applicable and appraisal rights shall be available pursuant to subsection (a) of this section for the holders of any class or series of shares (A) who are required by the terms of the corporate action requiring appraisal rights to accept for such shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subdivision (1) of this subsection at the time the corporate action becomes effective, or (B) in the case of the consummation of a disposition of assets pursuant to section 33-831, unless such cash, shares or proprietary interests are, under the terms of the corporate action approved by the shareholders, to be distributed to the shareholders, as part of a distribution to shareholders of the net assets of the corporation in excess of a reasonable amount to meet claims of the type described in sections 33-886 and 33-887, (i) not later than one year after the shareholders' approval of the action, and (ii) in accordance with their respective interests determined at the time of the distribution.

(4) Subdivision (1) of this subsection shall not be applicable and appraisal rights shall be available pursuant to subsection (a) of this section for the holders of any class or series of shares where the corporate action is an interested transaction.

(c) Notwithstanding any other provision of this section, the certificate of incorporation as originally filed or any amendment thereto may limit or eliminate appraisal rights for any class or series of preferred shares, but any such limitation or elimination contained in an amendment to the certificate of incorporation that limits or eliminates appraisal rights for any of such shares that are outstanding immediately prior to the effective date of such amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchange or other right existing immediately before the effective date of such amendment shall not apply to any corporate action that becomes effective within one year of that date if such action would otherwise afford appraisal rights.

(d) Where the right to be paid the value of shares is made available to a shareholder by this section, such remedy shall be the exclusive remedy as holder of such shares against the corporate actions described in this section, whether or not the shareholder proceeds as provided in sections 33-855 to 33-872, inclusive.


This act shall take effect as follows and shall amend the following sections:
Section 1	October 1, 2013	New section
Sec. 2	October 1, 2013	New section
Sec. 3	October 1, 2013	New section
Sec. 4	October 1, 2013	New section
Sec. 5	October 1, 2013	New section
Sec. 6	October 1, 2013	New section
Sec. 7	October 1, 2013	New section
Sec. 8	October 1, 2013	New section
Sec. 9	October 1, 2013	New section
Sec. 10	October 1, 2013	New section
Sec. 11	October 1, 2013	New section
Sec. 12	October 1, 2013	New section
Sec. 13	October 1, 2013	33-856